Tamed or not?

Bernanke's upbeat report on the economy and Fed policy seem to be backed by the latest figures which suggest that inflation is under control. The Fed nevertheless maintains its tightening bias until further notice with Bernanke noting that his optimistic scenario is conditional on gasoline prices remaining under control and that we see less strain on capacity utilization. Oil may remain at current levels or even drop a little but certainly not as much as 30% as suggested by Sandford C. Bernstein & Co. Their wild predictions are nothing new, we heard the same story back in 2005. One thing is for sure though, we wont be seeing Fed action any time soon. They will be holding steady for at least the next couple of months unless there is a material change in the environment. We maintain our scenario of a soft lading type of deceleration for the US in 2007.